Cold calling is the solicitation of business from potential customers who have had no prior contact with the salesperson conducting the call. It is an attempt to convince potential customers to purchase either the salesperson's product or service. Generally, it is referred as an over-the-phone process, making it a source of telemarketing, but can also be done in-person by door-to-door salespeople. Though cold calling can be used as a legitimate business tool, scammers can use cold calling as well.
Cold calling, as a means to conduct business, has seen changes as technology has increased. Salespeople who use cold calling once followed specific guidelines in order to produce more profit. These guidelines, now believed to be misconceptions by Wendy Weiss, were as follows:
- The more calls a salesperson makes, the more sales will be made.
- Any number in the phone book is a potential customer.
- Practice makes perfect.
- Manipulation is key.
- Always be closing.
Cold calling has developed from a form of giving sales pitch using a script into a targeted communication tool. Salespeople call from a list of potential customers that fit certain parameters built to help increase the likelihood of a sale. This modern cold calling, sometimes called "warm calling", tries to "dig deeply to understand" the potential customer. To avoid being seen as scammers, legitimate businesses use cold calling as an introduction rather than as a means to close the sale.
Warm calling is when the sales people reach out to prospective customers that may have a relationship with the business; rather than complete strangers. These previous relationships may be mutual friends, trigger events, or signs of interest in the product or service which are often a result of Inbound marketing (e.g. visiting a website, social media interactions, webinars). Warm calling consider's the buyer's perspective and acknowledges that not everyone could be a prospective client.
With the development of newer technology and the internet, cold calling has gained some criticism. Jeffrey Gitomer wrote in a 2010 article for The Augusta Chronicle that "the return on investment on cold calling is under zero." Gitomer believes that cold calling will only annoy customers and will not attract business. Gitomer also believes that referral marketing is a better form of selling and marketing. According to Gitomer, there are "2.5 basic understandings of a cold call":
- Cold calling is the lowest percentage sale call.
- Cold calling has a very high rejection rate.
- Multiple rejections can change the salesperson's mentality and make it more difficult to act friendly and complete calls.
- Since the rise of Internet, social media and instant text messaging, a significant portion of people tends to prefer texting over calling and ignores incoming phone calls from unfamiliar numbers.
Cold calling has also been used by scammers. One such example was when groups of impostors pose as members of the Microsoft support team. The impostors call several homes from a database of Microsoft owners. The Microsoft customers were then told that there was a virus on their computers, and in order to fix it, they had to download a specific program. The program gave access to the computer files for the impostors. In July 2006, a survey conducted by Lactofree determined that cold callers were the most annoying thing in the UK. Cold calling has been a hallmark in the proliferation of boiler room scams selling fraudulent investment and sports betting schemes from Australia's Gold Coast.
Rules and regulations
Many countries have rules and regulations that limit and control how, when and whom companies can cold call. These rules and regulations are often implemented by government bodies that deal with telecommunication laws in their specific country.
The United States telecommunication laws are developed and enacted by the Federal Trade Commission (FTC). The FTC aims to "puts consumers in charge of the number of telemarketing calls they get at home". The United States, along with many individual states, have enacted various "Do Not Call" lists. These lists are based on the national US Do Not Call List which was enacted in 2003. Every month, since January 2005, companies are required by law to check the "Do Not Call List" database. They are required to remove the registered numbers from their leads lists. However the "Do Not Call List" has certain limitations. Even if a person is registered for the "Do Not Call List", certain organizations can still call. These organizations include:
- Telephone surveyors, charities, and political organizations
- Organizations that one has had a business relationship with over the previous 18 months
- Any company one has given written permission
The FTC has also set certain regulations on when one can be called. Cold calling can only be done in between 8 a.m and 9 p.m. The caller is also required by law to tell the customer who they are and what organization they represents. This includes clarifying if the organization is a for-profit organization or charity. The salesperson also must reveal all information about the product they are selling. This means that they are legally required not to lie.
Many other government organizations monitor cold calling within their jurisdiction including the U.S. Securities and Exchange Commission(SEC). The SEC specializes in monitoring cold calling that deals with stocks, specifically stockbrokers. When investing over the phone, the SEC states that written banking information must be given. This means that an investment cannot be made over the phone.
The National Do Not Call List (DNCL) is administered by the Canadian Radio-television and Telecommunications Commission (CRTC). As with the U.S. version, the rules exclude surveyors, charities, political organizations/candidates, organizations that one has had a business relationship with over the previous 18 months or has otherwise granted permission, as well as newspapers seeking subscribers.
The United Kingdom has its own version of the "Do Not Call List" known as the Telephone Preference Service (TPS). Any citizen of the United Kingdom can register for the list that aims to eliminate its participants from receiving unsolicited calls from organizations including charities and political parties unlike the United States and Canada. TPS was first enacted in 1999 and eventually saw changes in 2003 that ultimately created the Privacy and Electronic Communications (EC Directive) Regulations 2003. While the TPS prevents unsolicited sales and marketing calls, it does not prevent "recorded/automated messages, silent calls, market research, overseas companies, debt collection, scam calls" according to the TPS website.
In 2012, Richard Herman from Middlesex sent an invoice to a company for the time they had kept cold-calling him. He eventually took the company to the small claims court, leading to the company settling out of court. He had been phoned several times by the company despite being listed with the Telephone Preference Service.
Australia has its own version of the "Do Not Call List" known as the Do Not Call Register. The "Do Not Call Register" is under the jurisdiction of the Australian Communications and Media Authority (ACMA) which acts as the supreme telecommunications authority in Australia. Registering for the "Do Not Call Register" prevents telemarketers and fax marketers from contacting registered members. Registration for the program is free and will last for eight years. Similar to other countries, there are exceptions to the "Do Not Call Register". These exceptions include: political parties, charities and educational institutions. The "Do Not Call Register" takes effect 30 days after registration.
Republic of Ireland
In the Republic of Ireland, the "National Directory Database" is an index of numbers that cannot be called for the purposes of 'cold calls' and/or sales and advertising. An unsolicited marketing call to a number on the National Directory Database is a criminal offence.
Some financial products are totally not permitted to cold-call, but the practice is generally permitted within a guideline which requires stating the name of the business, full name of the caller, name of the product and intention of solicitation. There is no do-not-call list. The Japanese government's Financial Services Agency maintains a list of known fraudulent entities involved in financial cold-calling scams.
Within the European Union, the Data Privacy Directive 2002/58/EC requires the governments of its member states to issue laws until June 2007 that prohibit general cold calling. However, the directive allows both an opt-in or an opt-out model, i.e. requiring a national register for phone numbers which either do (opt-in) or do not (opt-out) welcome cold calls.
In India, TRAI (Telecom Regulatory Authority of India) has enacted a regulation which bars telecom providers cold-calling their customers.
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